Which pattern could be more effective?

13 בדצמ׳ 2021

At the first glance, You may find both patterns correct and justify both!
But adding ATR to the chart may reveal the hidden truth!
ATR only measures volatility and not the direction of an asset's price.


Pattern 1: Broadening Formation or Megaphone

What Is a Broadening Formation?
A broadening formation is a price chart pattern identified by technical analysts. It is characterized by increasing price volatility and diagrammed as two diverging trend lines, one rising and one falling. It usually occurs after a significant rise, or fall, in the action of security prices. It is identified on a chart by a series of higher pivot highs and lower pivot lows.

Pattern 2: Corrction/consolidation
In this situation, we expect lower changes in ATR readings!

Best,
Moshkelgosha

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Reference Articles:
https://www.investopedia.com/terms/a/atr.asp
https://www.investopedia.com/terms/b/broadeningformation.asp
https://www.investopedia.com/terms/c/correction.asp